In his Budget today, the Chancellor gave a much needed boost to pensioners’ savings income in a raft of measures that were broadly welcomed.
- Pensioner Bonds are to be introduced in January 2015 offering very attractive (in relation to bank saver rates over the last few years) interest rates of 2.8% and 4%.
- Pensioners are to be given far more freedom in relation to their Defined Contribution Pension Plans and will no longer be forced to take an annuity but will be able to take any amount out of their pension pot and, instead of the penal rate of 55%, they will now pay at their individual marginal rate of tax on any withdrawal. The 25% tax free lump sum facility is retained.
- The 10% band of tax which applies, in certain circumstances, on the first £2,880 tranche of savings income in 2014/15, has been chopped and now effectively becomes a nil ie 0% rate band.
- Furthermore the tranche at 0% has jumped to £5,000 in 2015/16.
- ISA limits for everyone have been increased and there will no longer be the distinction between cash ISAs and Stock & Shares ISAs; the combined ISA will be known as a New ISA (NISA). The new annual limit will be £15,000 and these NISAs will be available from I July 2014.
- Transfers from existing ISAs can be made into a NISA and any combination of cash, stocks and shares can be invested, up to the £15,000 annual limit.